Us Financial Crisis And The Impact
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4
AB C & #D ,C ,% 2 . #., #D& EF'G , %, * &3 & Unit, th 1,400 New Single-Family Home Sales
1,200 1,000 800 600
+14.6 yrs
400
+4.6 yrs
+2.8 yrs +3.9 yrs
515
Note: As of July 2008
5
Sources: Bloomberg, TISCO Research
4, , #.,DH '+ #DH&* 1IJ9KLM
%
Fed Funds Rate
7 6 5 -5.5%
4 3 2
2.00
1
Note: As of August 2008 Sources: Bloomberg, TISCO Research
6
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
0
Jan-08
Jan-05
Jan-02
Jan-99
Jan-96
Jan-93
Jan-90
Jan-87
Jan-84
Jan-81
Jan-78
Jan-75
Jan-72
Jan-69
Jan-66
Jan-63
200
2 * ' C%$. '+ ' "T 2 * & YoY (%) 20
S&P Case Shiller Home Price Index
15 10 5
+130%
0 -5 -10 -15 -20
Note: As of June 2008 (Quarterly)
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-93
Jan-92
Jan-91
Jan-90
Jan-89
Jan-88
-15.4
7
Sources: Bloomberg, TISCO Research
' , UVD 1OJ9KLM
% MBS Issuance
500 450
Annual Subprime Issuance
400
Percent of Total MBS Issuance 363
465
25
449
20
350 300 250 200
15 195
10
123
150 100
202
87
5
52
50 0
2 0 2000
2001
2002
2003
Note: As of June 2008 Sources: Freddie Mac and Fannie Mae, TISCO Research
2004
8
2005
2006
2007
Jun08
UVD #D ,C ,* ,2"AW15IJ9KLM
1 "<:=' 76< %#1 "<!08 #5 /6% 3$ 1/
1=6## < %#1 "<!08 #?/ #93@1 " 3
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> 7 IMTKGHL NVGROVPI W1 "<
1 IMTKGHL NG HSNVG I %X 0
9
Source: Wikipedia
UVD 1OJ9KLM
20%
15%
13% 9%
10%
5%
5%
0% 1994
1996
1999
10
Source: Wikipedia
2006
H-3 UVD 1OJ9KLM
Shares of the US loans Outstanding
Subprime ARM, 6%
FHA, 8%
Subprime Fixed, 6%
Prime ARM, 15%
Prime Fixed, 65%
Note: As of March 2008
11
Sources: MBA, TISCO Research
] -W T33C -* , - ' W,T '+ 15O?>JLMSM^:SM8=@ Mortgage Broker Loan Proceeds
Borrower
Lender Loan Loan
Monthly Payment
Servicer
Cash
Trustee
Monthly Payment
Underwriter
Issuer
Securities Cash
Rating Agency Monthly Payment
Credit Enhancement Provider
Investors 12
Source: Wikipedia
' W,T '+ 15O?>JLMSM^:SM8=@12V - /
C NMGHSHYVSHOP< 3$ 8%1/ '7/11 "< /5#)69 $6 0 0$ 83 6 %X /
1 6 / '7 #% 3
/
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1/6 / '7% 3 /
1 9
$6 0 0$ ' W1 "< #Z <ABC
DEF933/0% 3 2/83$6 /8 # :;$68 # 6 93 98 =% %X#$Z SGVPN[ I 83!8 #3#$ \936$68 # / < $! =>#>W$6 83
Sources: Wikipedia, Investopedia, The Hand Book of Fixed Income Securities 13
de1% 2 V 1 '+ C #.' A1OJ9KLM
* ,% C*3# * H 3' A UVD 15 3C*3# * 1Ffgf!gFFF1 @ 40% 34% 31% 30% 22% 20%
8%
10%
0% % Homeowner with Prime Mortgage
1
% Renter
1
% Homeowner (no 1 mortgage)
% Homeowner with Subprime Mortgage
5%
% Homeowner with Alt-A Mortgage
Census Bureau data
2
Estimated methodology: Using the number of loans outstanding in the Loan Performance and EMBS database, adjusting upward for the database capture rate (which is not 100%), and then also adjusting upward based upon reported estimated of securitization rates, by product type. The resulting estimate of the total number of loans extant by product category is then divided by the number of households. * First-liens only, to avoid double counting Sources: eMBS, Loan Performance, Deutsche Bank
14
3 ' , UVD 5C 3V @, , 3 3 #.,C* * % C #.* ,2"AW C #.U . # 3.0%
2.8%
2.5% 2.0% 1.5%
1.3%
1.0% 0.5% 0.0% 2001
2007
15
Source: Wikipedia
' A1OSLJ>SJL?R1>L?RMS1 4 , Z ' A1ISLJ>SJL?R1QM=:=>? 013 2V - H-3$ WD33%$. / billion US$ 3500 CDOs 3000 2500
ABS MBS
2000 1500 1000 500 0 2000
2001
2002
2003
2004
2005
2006
2007
Note: CDOs = collateralized debt obligations; ABS = asset-backed securities, including auto, credit card, etc., and excluding MBS; and MBS = mortgage-backed securities, excluding U.S. agency MBS. Source: IMF
16
* ' A1X8LSY:Y?1a:>`?R1I?>JLMSM?O15XaI@ MBS Subprime Mortgage Loans
Investor AAA
Lender
80%
Investor .
SPV Payment
AA
11%
.
A
4%
.
BBB
3% 2%
Investor
BB-Unrated
17
Sources: TISCO Research, IMF
* ' A1N877:S?L:7M^?R1b?9S1c97MY:SM8=O15Nbc@ Subprime MBS
ABS CDO
AAA AA A BBB BB-unrated
AAA AA A BBB BB-unrated
62%
Junior AAA
14%
AA
8%
A
6%
BBB
6% 4%
Investor .
SPV
. . AAA AA A BBB BB-unrated
BB-Unrated
18
Sources: TISCO Research, IMF
Investor
Senior AAA
. . Investor
* ' A1N877:S?L:7M^?R1b?9S1c97MY:SM8=O 5Nbc @ ABS CDO
ABS CDO
Senior AAA Junior AAA AA A BBB BB-unrated
2
Senior AAA
Investor 60%
Investor
Senior AAA Junior AAA AA A BBB BB-unrated
SPV
Junior AAA
. . Senior AAA Junior AAA AA A BBB BB-unrated
. 27%
AA
4%
A
3%
BBB
3% 2%
BB-Unrated
. . Investor
19
Sources: TISCO Research, IMF
UVD #D ,C ,* ,2"AW &[ C '3 '+ UVD #D ,C ,* ,2"AW#D C '3 '+
80%
75%
70% 60%
54%
50% 40% 30% 20% 10% 0% 2001 Source: Wikipedia
2006 20
23 UVD V #-D 3 333# H&*3#23 23 UVD V #D C' & U 'G5EEF_W EE@ Subprime Residential Mortgage-Backed Securities (originated since 2005) B
BB
BBB
A 1 category
AA
2 categories AAA
3+ categories 0
20
40
60
80
100
Downgrades from original issue rating (in percent) 21
Source: IMF
hij1% UVD #D ,C , 1 WD3%$. , Z& 11 V #D 3 UVD * #D UH #.&
%
Prime (Fixed)
%
Prime (Adjustable)
7
Subprime (Fixed)
Subprime (Adjustable)
30
6.8
26.8
6
25
5
20
4 15 3
9.6 10
2
1.3 5
1
Sources: Bloomberg, TISCO Research
22
Mar-08
Sep-07
Mar-07
Sep-06
Mar-06
Sep-05
Mar-05
Sep-04
Mar-04
Sep-03
Mar-03
Mar-02
Mar-08
Sep-07
Mar-07
Sep-06
Mar-06
Sep-05
Mar-05
Sep-04
Mar-04
Sep-03
Mar-03
Sep-02
Mar-02
Note: As of June 2008
Sep-02
0
0
AW , -3 %*CA ' #.,1j;ack1 l 2 15m_9M77@ bps 350 TED Spread
300 250
250.0
200 150 100 50 Sep-08
Aug-08
Jul-08
Jun-08
May-08
Apr-08
Mar-08
Feb-08
Jan-08
Dec-07
Nov-07
Oct-07
Sep-07
Aug-07
Jul-07
Jun-07
May-07
Apr-07
Mar-07
Feb-07
Jan-07
0
Note: As of 23 September 2008 23
Sources: Bloomberg, TISCO Research
"#$%&'($)*+,'-.*/0"(-1 Premium CDS
!" #$%&'
Physical or cash settlement
A
Seller
Nothing
B #$01 A
2)'3$#$&45#$%&'$6$7'
B
2)'3$#$&4785#$%&'$6$7'
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24
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0:<DEC :; 01 `#$01 <?0 50aZ 1 WVD ZH- 1 /?/$ \ = 6 > 0=%/?!DEC 6 >/93= 0@ 8/#5 6 >/93 b7
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25
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26
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bp
iTraxx Europe Index
!"##$!%&'
4/9/2008
18/9/2008
21/8/2008
7/8/2008
24/7/2008
10/7/2008
26/6/2008
12/6/2008
29/5/2008
1/5/2008
20/3/2008
24/9/2008
10/9/2008
27/8/2008
13/8/2008
30/7/2008
16/7/2008
2/7/2008
4/6/2008
18/6/2008
7/5/2008
21/5/2008
23/4/2008
9/4/2008
26/3/2008
90 70
15/5/2008
170 150 130 110
3/4/2008
210 190
17/4/2008
bp 150 140 130 120 110 100 90 80 70 60
!"##$!%&'
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28
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% % CDS 5* * T @ (1) mid-2006
mid-2007
mid-2008
!"##$!%&'
end-2006
mid-2007
end-2007
34.5
45.5
62.2
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30
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Asset-Backed Commercial Paper - SA Total Commercial Paper -SA Financial Commercial Paper - SA
US$, bn 2,500
2,000
1,500
1,000
Jul-08
Jul-07
Jan-08
Jan-07
Jul-06
Jul-05
Jan-06
Jul-04
Jan-05
Jul-03
Jan-04
Jul-02
Jan-03
Jul-01
Jan-02
Jan-01
(#)% *+#,-%.)%$!%& /0112 -#3&4% 5"##$!%&'06%7%&8"9%+%&:%0;<-=>9%+%8&4?
31
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32
0
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/0 1 23 '! 4 ,' '# 568 7 9:;1<67 =>? @ABC0DEF: GHIJKLDM;/0BN
J Q !' 43 ,' '# ' S;<67/TNMUK
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< 1 2 $ '#(S;<67/TNMUK
< 1 V& SOLGKM V W.97OMDM @\B0OJ \ Q /0;BCBN9BNM=C ?>MGa<EMH]J6F V W A>M97OM
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.
33
H "T1 1'G1EE !"#$%&'()* +, --. 0 Q ,8Bd\BOL;]T`B<
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34
< 1 $+ '& $ ' k'#BO1TOM SOLGKMV W . A>M 97OM
.
< Q lMOQOBk'4R # m6< 1aLo
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17 < 1 51 Fed /S7O=P];M ;>LUHL/TNM /S7OJ6:Bd??
D4-* % #. #,1PIy1E)1 * 1 . - 31!FF
Source: Reuters
35
3 *-%'([ 15 1 3 #D 3 WVD '([ 1j?x?L:Y?1L:SM81% 3 #D ,C & C US Top Commercial Bank (US$, m) Citigroup Merrill Lynch JPMorgan Morgan Stanley Wachovia Bank of America Washington Mutual Lehman Brothers Wells Fargo Goldman Sachs Other Company (US$, m) Freddie Mac Fannie Mae AIG International Top Commercial Bank UBS HSBC IKB Deutsche RBS Deutsche Bank Credit Suisse Barclays Capital HBOS Plc ING Groep Societe Generale Mizuho Bnp Paribas
-#3&4% 5"##$!%&'0;<-=>9%+%8&4?
Assets Liabilities Equity 2,100,385 1,963,980 136,405 966,210 931,432 34,778 1,775,670 1,642,494 133,176 1,031,228 996,735 34,493 812,433 734,274 78,159 1,716,875 1,554,184 162,691 309,731 279,731 30,000 639,432 613,156 26,276 609,074 561,110 47,964 1,088,145 1,039,640 48,505 Assets Liabilities Equity 879,043 865,964 13,079 885,918 844,528 41,390 1,049,876 960,539 89,337 Assets Liabilities Equity 2,077,635 2,025,341 52,294 2,546,678 2,412,667 134,011 50,245 49,061 1,184 1,948,745 1,845,052 103,693 1,990,740 1,957,068 33,672 1,229,825 1,176,988 52,837 1,365,654 1,332,832 32,822 681,404 660,271 21,133 1,369,946 1,339,981 29,965 1,075,925 1,035,687 40,238 154,753 149,425 5,328 1,817,193 1,761,060 56,133
36
D/E 14.40 26.78 12.33 28.90 9.39 9.55 9.32 23.34 11.70 21.43 D/E 66.21 20.40 10.75 D/E 38.73 18.00 41.44 17.79 58.12 22.28 40.61 31.24 44.72 25.74 28.05 31.37
2 % 1&U* 3 1PIyd1* * 15 31m{ki@1 & U , V &
Source: Reuters
Source: Reuters
37
38
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41
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1/ w 0=%! 3 183 /?=6# $6>; 1 BOP lPIMG GI "#jDjW jLTVNWABlj:;%m99? b7$#6
% 3 BOP I9$>;nCz*(,00
<6> 1/ '7BOP lPIMG GI93=%5# % 1g//BOP lPIMG GI #
0=% % 3 !0
q(
@ 3/$1 1 b7=%25612< "#? %
44
' Z #D* 315 @ U ' H - 31!1 1)1%
Oct 2 Last day of USShort Selling Prohibit
Oct 14 Earnings Release: - 3Q08 Wells Fargo
Oct 16 Earnings Release: - 3Q08 Citigroup - 3Q08 State Street - 3Q08 Merrill Lynch
Oct 15 Earnings Release: - 3Q08 WAMU Oct 17 Earnings Release: - 3Q08 Bank of New York Mellon - 3Q08 Northen Trust
Oct 20 Earnings Release: - 3Q08 Bank of America
Oct 30 Earnings Release: - 3Q08 UBS
Oct 23 Earnings Release: - 3Q08 Credit Suisse
Nov 20 Earnings Release: - 3Q08 Freddie Mac
Nov 7 Earnings Release: - 3Q08 Fannie Mae - 3Q08 AIG
Oct 22 Earnings Release: - 3Q08 Wachovia
Dec 18 Earnings Release: - 4Q08 Goldman Sachs
Dec 12 Earnings Release: - 4Q08 Lehman Brothers
Dec 19 Earnings Release: - 4Q08 Morgan Stanley
@ 3//=6#= 0% ;9 % 3 )@ 1!"#$/@ #6 @ 3//6 #>
1 !3/ %X 90 [LVP BOGS[ GI w'3DHSHUGOMK 83BVPJOQ u OGJA RROP @ 3/9
'1 6; # $ \$DECI/ 3 9 < 063 [LVP BGOS[ GI:; 1 ;9 $/r+ (( +r
-#3&4% 5"##$!%&'0;<-=>9%+%8&4?
45
' Z #D* 315 @ #D '+ 1mLJOS??1&* #.% 1j?q<:=1aL8Sq?LO <2=>? 1 2 3 4 5 6 7 8 9 10
&@2=#2(64" Citibank Bank of New York Mellon AOZORA Mizuho Corporate Bank Citibank (Hong Kong) BNP Paribas Shinsei Bank UFJ Bank Sumitomo Mitsubishi Banking Svenska Handelsbanken
+( 6A> Bond Debt Bond Debt Bank Loan Bank Loan Bank Loan Bank Loan Bank Loan Bank Loan Bank Loan Letter of Credit
46
-#3&4% C-58AD&3.)4E=#3&)-#3)?%&AFB+)&B4)#,(%@G#&D0;<-=> 9%+%8&4?
0B 3C2 ( :27 2(;&'()*) ~138,000 ~17,000 463 289 275 250 231 185 177 141
' Z #D* 315 @ b8<M=81rQQ?>S1'([ % 1#D3# & ,4 '
&
& # 4
V&
47
-#3&4% 5"##$!%&'0;<-=>9%+%8&4?
' Z #D* 3 [U##D3# 3o 2 WD3%$. , Z% 1NbIO
Credit Default Swap
Derivatives
Financial guarantee
IAS 39
IAS 37
- Payment is contingent on an event other than default by reference entity - Recognition when "Credit event" such as ratings downgrade or a change in credit spread - Most CDS define a credit event
-#3&4% <*-0;<-=>9%+%8&4?
- Book as Contingent Assets/Liabilities - Recognition loss when default
48
@ 3//6 1 ;9 b [LVP BGOS[ GI8# %X* b< r 1g// % 3 ?0 50 [LVP BGOS[ GI 0 %X 2 3 [LVP 6 b7ljCqx * 1g//:<DEC 9 [LVP BGOS[ GI 80 $ /; = 9 AVGJ-SO-LVGJ S 0G } GI #$ ! =
/? 6 b7ljCqy
4 '([ #DH 3 '+ A , A 41'G1E Real GDP YoY (%)
Country
Consumer Prices YoY (%)
2007 4.7 2.1
2008F 3.6 1.3
2009F 3.0 0.9
2007 3.6 2.1
2008F 5.6 3.7
2009F 3.9 2.4
US Japan Euroland
2.0 2.0 2.6
1.8 0.2 1.2
1.1 0.4 0.1
2.9 0.0 2.1
4.7 1.4 3.6
3.1 0.3 2.5
Asia (ex. Japan) India China
9.4 9.3 11.9
8.0 7.7 10.1
7.1 6.3 8.9
4.3 4.6 4.6
7.4 9.6 6.5
5.2 6.3 4.0
EMEA Latin America
6.7 5.4
6.2 4.3
6.4 3.7
10.5 6.2
12.3 7.3
9.4 6.6
World G7
(#)% *+#,-%.)%$!%&0112 -#3&4% F%3)+4?%58AD
49
#.,?R1J=RO1k:S?
b3
6
1 FAD 66 1 MP I cVS /*(pp 6<$/r. *++r !0 #$6 / ) g 1993"3 $83%m99 # 1 4f/9 '165; 9 6?66E MSIN[ BVPJ6$# FAD68$06/93 =%9 < (( +* #= \ 9 MP lLKRH kGOTVTHRHSe83
%8% H R DMG} 16#]]b $ # % $ 9093 %X%m99;/] #8$06
50
15 @ 2 T
# 1 7= 0 @ 3/ "1! 338 #8$06$6@@$ ?8 ;9 q%m99= 08 # r $6'6 /93!"0 <6< 0 8 % '<$?6 1 4f / 8/ MP IcVS * 5 83 g5#! 3 583' 06/93% $ 6 # $2$3 ) g 1983/!0 7 68\#= 0 q ! b/%m]>
1? 6 =%! ? %93/!0# 15 6 ## 6 $#/ = 0
51
15 @ #.,1?R1J=RO1k:S?15 @
_$%_+7%42C/,&$%F#8H*H&,&'`
J-D86$#7C$7'43&)'%8.7.*#%C8#$'3*7MQH/ (%)
%
1.50
1.75
2.00
2.25
4.5
100 90 80 70 60 50 40 30 20 10 0
4.0 3.5 3.0 2.5 2.0
-#3&4% 5"##$!%&'
16-Sep-08
9-Sep-08
2-Sep-08
26-Aug-08
19-Aug-08
5-Aug-08
12-Aug-08
29-Jul-08
22-Jul-08
8-Jul-08
15-Jul-08
1-Jul-08
24-Jun-08
17-Jun-08
10-Jun-08
1.5 1.0 1/1/08
2/12/08
3/26/08 US2YY
52
5/7/08 US5YY
6/19/08
7/31/08
US10YY
9/11/08 tenor (yrs)
15 @ #.,?R1J=RO1k:S?15 @
27&'&*,a8H,$44",*&C4W > 9
_$%_+7%4b*'$ J-J7$C/,8`C$7'#*'$ %
450
6 7
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-90
8
Jul-08
Apr-08
Jan-08
Jul-07
Oct-07
Apr-07
Jan-07
Jul-06
Oct-06
Apr-06
Oct-05
Jan-06
Jul-05
250
5
Jan-93
300
4
Jan-92
350
Apr-05
%
Unemployment Rate (Inverted)
3
Jan-91
Initial Jobless Claims (4 Weeks MA) 400
Jan-05
Fed Funds Rate (LHS)
9 8 7 6 5 4 3 2 1 0
53
-#3&4% 5"##$!%&'
15 @ 1NL?RMS1LMO`1 #.%
:^G> > Xc?_$%_+7%4b*'$R Md^
"#$%&'#&4I] 9 Y:]ec ?< < RY
(%) 6.0
Fed Funds Rate
3m USD swap OIS
Spread of Libor to Overnight Index Sw aps
bp 140
3m LIBOR
5.5 5.0
120
4.5
100
4.0
80
3.5
54
S e p -0 8
J u l- 08
A u g - 08
Ju n - 08
M ay-0 8
A p r-0 8
M ar-0 8
F eb - 08
J an - 08
D ec- 07
N o v- 07
O ct- 07
S e p -0 7
J u l- 07
A u g - 07
Sep-08
Jul-08
Aug-08
Jun-08
Apr-08
May-08
Mar-08
Feb-08
Jan-08
Dec-07
Nov-07
Oct-07
Sep-07
Jul-07
Aug-07
Jun-07
May-07
Apr-07
Feb-07
Mar-07
Jan-07
-#3&4% 5"##$!%&'0;<-=>9%+%8&4?
Ju n - 07
0
1.0
M ay-0 7
20
1.5
A p r-0 7
40
2.0
J an - 07
2.5
F eb - 07 M ar-0 7
60
3.0
15 @ 1H ,C& U % #.15b?_7?x?L:Y?@ US Commercial Assets/Equity
times
15 @ "T * & 1, 2 UH #.C , V D % 30 25
Subprime (Fixed)
Subprime (Adjustable)
Prime (Fixed)
Prime (Adjustable)
20 15 10 5
-#3&4% 5"##$!%&'
56
Mar-08
Sep-07
Mar-07
Sep-06
Mar-06
Sep-05
Mar-05
Sep-04
Mar-04
Sep-03
Mar-03
Sep-02
Mar-02
0
Jul-08
Jul-07
55
-#3&4% 5"##$!%&'0;<-=>9%+%8&4?
Jan-08
Jul-06
Jan-07
Jul-05
Jan-06
Jan-05
Jul-04
Jan-04
Jul-03
Jan-03
Jul-02
Jan-02
Jul-01
Jul-00
Jan-01
Jul-99
Jan-00
Jul-98
Jan-99
Jul-97
Jan-98
Jul-96
Jan-97
Jan-96
Jul-95
Jan-95
Jul-94
Jan-94
15 14 13 12 11 10 9 8 7 6 5
15 @ 23 & H-'C 3 #DU Real GDP (LHS)
YoY (%)
Initial Jobless Claims
YoY (%)
Continuing Jobless Claims
10
-40
8
-10
6
20
4 50 2 80
0
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
140 1972
-4 1970
110
1968
-2
57
-#3&4% 5"##$!%&'0;<-=>9%+%8&4?
15 @ A UVD $ 3 UVD #D ,C ,-' $ UVD WVD 4A2 %
-#3&4% 6%7%&8"9%+%&:%
58
2Q08
90 80 70 60 50 40 30 20 10 0 -10 -20 4Q06
2Q05
4Q03
Subprime Nontraditional Prime
4Q00
2Q99
4Q97
2Q96
2Q93
4Q91
2Q90
90 80 70 60 50 40 30 20 10 0 -10 -20 -30
4Q94
Other Consumer Loans Mortgage to Individuals Consumer Credit Cards
2Q02
%
PI1 8JO?1KLM>?1R?>7M=?1<:s1q:x?1QJLSq?L1S81Y8 2 * & 13# 4 *3#D -'1 5 3VD ' #, #, & #% ' W ~ *@
Source: OECD, DB Global Markets Research T marks the year of the peak in prices; T-5 and T+5 the years before and after 59 the peak.
6L8uSq17M`?7s1S81L?<:M=1O7JYYMOq1Q8L1O?x?L:71s?:LO 43# 4 *3#D '+ ,'G1 5 3VD ' #, #, & #% ' W ~ *@
Source: IMF, DB Global Markets Research T marks the year of the banking crisis; T-5 and T+5 the years before and after the crisis. 60
rJMSs1<:L`?SO17M`?7s1S81L?>8x?L1:q?:R18Q1Sq?1?>8=8<s * 3# B Z WV. 1 5 3VD ' #, #, & #% ' W ~ *@
Source: Datastream, S&P, DB Global Markets Research T marks the year of the banking crisis; T-5 and T+5 the years before and after the crisis. 61
PI1<8=?S:Ls1?:OM=Y1J=JOJ:77s1:YYL?OOMx? 4, , % 13# 4 *3 2,3%$. 1 5 3VD ' #, #, & #% ' W ~ *@
Source: BLS, FRB, Haver, DB Global Markets Research T marks the year of the banking crisis; T-5 and T+5 the years before and after the crisis. 62
IMY=MQM>:=S1QMO>:71?:OM=Y1K:LS18Q1Sq?1OS8Ls 4, , 2 % 13# 4 *3 2,3%$. 1 5 3VD ' #, #, & #% ' W ~ *@
Source: Datastream, DB Global Markets Research T marks the year of the banking crisis; T-5 and T+5 the years before and after the crisis. 63
4 4 *3 #,. 4, ,' % ' p1H ,C& %
+( 6>J JEB>op 1KnB8 ;>TM(Discount rate) @G1(1-day repurchase rate)
(#)% *+#,-%.)%$!%&0112 -#3&4% F%3)+4?%58AD0;<-=>9%+%8&4?
+( 025#2(7%(27#6=H/I/=2/ 3 6G7 6 6G7 12 6G7 +DEEF= 2.00 2.00 2.00 2.00 4.25 4.25 4.00 3.50 5.00 5.00 4.75 4.00 0.50 0.50 0.50 0.50 4.14 4.14 4.14 4.14 3.50 3.50 3.50 3.50 9.00 9.25 9.25 8.00 5.25 5.25 5.00 4.50 3.63 3.25 3.00 3.00 3.75 3.75 3.75 3.75
64
3 *-%'([ 15 @ NbIO1' # .& 1 ,4 '1 3#3 U , V & #D1d1, E bp
bp
230 210
160
US CDX Index
140
190 170
Europe CDX Index
120
150 130
100
110
80
90
60
70
(#)% =FH
-,01'G1EE1'G 23 ' 2*C % 4 US$, m
YoY (%) Trade balance (RHS)
60
Exports
Imports
3,000
50
2,000
40 30
1,000
20
0
10 -1,000
0 -10
-#3&4% 5#;0U#=0;<-= rel="nofollow">9%+%8&4?
66
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
-2,000
17/9/2008
3/9/2008
20/8/2008
6/8/2008
9/7/2008
23/7/2008
25/6/2008
11/6/2008
28/5/2008
14/5/2008
30/4/2008
16/4/2008
19/3/2008
9/9/2008
26/8/2008
12/8/2008
29/7/2008
15/7/2008
1/7/2008
3/6/2008
17/6/2008
20/5/2008
6/5/2008
22/4/2008
8/4/2008
25/3/2008
2/4/2008
40
50
-,01'G1EE1'G 23 ' 15 @ h?S1N:KMS:7178u1, 2-* '([ US$, m
Current A/C
Net Capital Movement
Baht (RHS)
Bt/US$
9,000
31
7,000
33
5,000
35
3,000 37 1,000 39
-1,000
Jul-08
Jul-07
Jul-06
Jul-05
Jan-08
43 Jan-07
-5,000 Jan-06
41
Jan-05
-3,000
67
-#3&4% 5#;0;<-=>9%+%8&4?
-,01'G1EE1'G 23 ' 15 @ * Bn , 23# ,C -3 'G1E YoY (%)
YoY (%) Headline CPI
12
Core CPI
PPI (RHS)
25
10
20
8 6
15
4
10
2 5
0 -2 Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
0
-#3&4% U#=0;<-=>9%+%8&4?
68
O L Q VO VWX L YZ [Y\ ]O VO VWXLJ^VO L^L J^ O ] _˞%& _&B4%
J^ JLOM La OVYd Y\ V^O L QVO VWX L J P P NLOJ e e O e VLO ^ O VO VWX L VJ a O OYZ
-,01'G1EE1'G 23 ' 15 @ 1, % .H #D ' #., 4, ,& ,11'G%* *
% 6
Forecast
5 RP 1-day
4
3 2 1
Jul-09
Jul-08
Jan-09
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jul-04
Jan-05
Jan-04
Jul-03
Jan-03
Jul-02
Jul-01
Jan-02
Jan-01
0
8 8 0 1 4f / / !0 $69 %X / 0 % '1 6 #= \ 6$6 0 "3 $ ) g 190 1 $#/93= 0 \ ! b / # 83 ? 0 83# @ # ) g 1 9 # " 99;93 \ / 8# % 3 /)=/93 6//$ < /? 3$# % 3 /)/ 6 5# 6 / !0 %/(=6# 9 %X 0 !"0 6 0 '< g
rel="nofollow"> 2' 8 %
69
-#3&4% 5#;05"##$!%&'0;<-=>9%+%8&4?
% -,01 #. 3* '#D, '% #., 4, ,% -, 13# #D 2* % 6 RP 1-day
Fed Funds Rate
5 4 3 2 1
-#3&4% 5#;05"##$!%&'0;<-=>9%+%8&4?
70
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
Jul-04
Jan-04
Jul-03
Jan-03
Jul-02
Jan-02
Jul-01
Jan-01
0
% -,0 #.15 @ 2VD -% W o -, 1-3 3# ,H2 []$D 1 ?!BN9P f
g?
?!M9P f
g?
0.08
2Yrs TH bonds and US bonds movement
0.04
0.06 10Yrs TH bonds and US bonds movement
0.03 0.04
0.02
0.02
0.01 0
0 -0.1
-0.08
-0.06
-0.04
-0.02
0
0.02
0.04
0.06
0.08 -0.2
-0.02
-0.15
-0.1
-0.05
-0.01
0
0.05
0.1
0.15
-0.02 -0.04
-0.03 -0.06
-0.04 -0.05
9 ); g'$#
%8% @ 8/'
=/ ] # 6$#6%m99< <9 %m99 0 / 3/ # ' =/ "#%m99 0
6<83 6 0 ) g 19 ! 33%m99
6</ 16 16#@/!0 H R DMG} 0 %XOGLVR H R NMG} $6@@$! ' %&093 9 8$06 /6 $6@@$ !%&*++*
-#3&4% ;?8B5U*05"##$!%&'0;<-=>9%+%8&4?
71
o 2 W"U,T' -,01 "#1j?q<:=1aL8Sq?LO 4, A2 o 2 -3 '+ ,H2 [14,o W-* 3#D 1 Oa ` a fg^Lhg^ Y NLO i%?$8A5&#)?%&+ eOe [j ^ PfJ ^Lg JK O^ Q^h JkgY b Q Q ^f J^ Oa eO e` [l eO eV J ^Q ^ e Q^LgahYZ e NLOh J m
BBL
Oa ` a fNLOi%?$8A5&#)?%&+ eOe j Q^gNgY ` [l n Na O^ oPfgVYpVPQ V N]Q^Q VJ NLOVP Na Oa
e P fOa V O[j/mNLOgahYZ V^ e
SCB
72
0.2
o 2 W"U,T' -,01 "#1j?q<:=1aL8Sq?LO o 2 -,1 o 2 # ,o,1-* W#, * 3 & 1Nbc
<9 CDO/KTB83BAY = 0=%/? %X / %X corporate-backed securities /6 $# rpp 1g/"! 6 1 %X@50 Lehman Brothers %X;! rpp 1g// %X@50 CDO 9;6$#@ 3/93 %X/06 9 CDO / 0mark-to-market!/? $ ]"
Scenario analysis for BAY and KTB on CDO losses
Exposure on CDO (Bt,m) Amount already reserve (Bt,m) Net exposure on CDO Net profit'08F
BAY Amount 2,857 1,451 1,406
% 51 49
KTB Amount 5,360 3,582 1,778
7,172
% 67 33
13,672
Additional % impact Additional % impact reserve to net reserve to net (Bt, m) profit (Bt, m) profit Expected CDO loss / total investment value
KTB
60% 70% 80% 90% 100%
BAY
263 549 835 1,121 1,406
3.14 6.54 9.95 13.35 16.76
0 170 706 1,242 1,778
Source : TISCO Research
73
o 2 W"U,T' -,01 "#1j?q<:=1aL8Sq?LO o 2 -,1 2 -, o 2 4*1-3 -* ' ,C*&* C% 1j?q<:=
KBANK 330 ( KBANK, SCIB,83TISCO = 06 %#1 "<
!0 1g/5 Lehman !? 19 16/ '7 #= \
#=6#= 0 @ 3/ <9 65# % 3 5>;*-, /#65#1 "< 9
# = 0 1/1
1!# "# 1/ '7 %X% 3 0$
SCIB 1,000 (
TISCO 1,300 (
74
0 0.87 3.61 6.36 9.1
o 2 W"U,T' -,01' Z #D* 3 & ' 2 '+ W#,1ve1% W,T 3 .3
/?! #% 3 /) 'b1"71 %X #$ 'r(. 1/ '7/6 ! 3 /?!?0 50 #% 3 /)1 %X 'rq?0 50/6 ! 3
6$#$1 >
1! 65# 'b1"7=/9= 0 @ 3/ '16 169 NOMPS GKVGSe GHIJI83@ 3/9 >
1< w'3>
1 "/ 61= 0 06"#$ < #= \ / =/#$!]#/?! #% 3 /)/6 % 3 $# %X "#$ $6 = 0 ! 3 ; Bt ,bn 250
32
$50m in CDO (100% provisioned) Bt 3.5bn exposure in Lehm an
$50m in CDO (97% provisioned) $1bn st ruct ured not es (principal guarant eed) (< 1% provisioned)
$85m in CDO (51% provisioned)
200 150 100
$160m in CDO (67% provisioned)
11
3
7
209
50
109
106
105
14
79
9
13
64
61
SCIB
BAY
KTB
3.3% 14.7%
1.2% 12.2%
0 Foreign BBL bonds: % assets 2.0% % equity 13.2%
SCB
TM B
KBANK
1.0% 9.3%
0.4% 2.5%
0.7% 6.3%
1.0% 17.2%
29 31 BT
Foreign Bond, Trading Foreign Bond, AFS Foreign Bond, HTM Local Bonds
13.9% 48.2%
75
"# $ 01 3,% 1j?q<:=19L8Sq?LO tqs1Sq?s17?S1j?q<:=1RM?1///1
6 < #$ %X*% 3 \< r 0/? 8 0=%m] [LVP %#!006393>5 $#
0=%$ $6 19 < * dKOIMG !#$/ %XE GH}VSH} lPISGML PSI6 > /?= 06 $#dKOIMG /65#83 =6#= 0 $6 06!= 6q:; /?! E GH}VSH} LVGJ S 6 > /?= 06 $# dKOIMG /65#!%m99?= 0 #= \ 60 ?%/= 09 b [LVP <860$#
'16/?/@#6 935#!
3 58 #=6#= 06$6$#$6 >
1936 =%
76
3,% 1j?q<:=19L8Sq?LO L E H R e v e n u e B re a k d o w n (U S m n ) R evenues P r in c ip a l t r a n s a c t io n s I n v e s t m e n t B a n k in g C o m m is s io n s I n t e r e s t a n d D iv id e n d s Asset M anagem ent T o ta l R e v e n u e (-) In te re s t E x p e n s e N et R evenue (-) N o n - In te re s t E x p e n s e I n c o m e b e f o r e p r o v is io n f o r in c o m e t a x e s ( - ) P r o v is io n f o r in c o m e t a x e s N e t In c o m e
-5 ,2 7 3 611 569 6 ,0 6 4 432 2 ,4 0 3 5 ,3 0 6 -2 ,9 0 3 2 ,9 2 1 -5 ,8 2 4 -1 ,8 9 7 -3 ,9 2 7
2Q 08 - 3 ,5 3 4 858 639 7 ,7 7 1 506 6 ,2 4 0 6 ,9 0 8 -6 6 8 3 ,4 1 9 - 4 ,0 8 7 - 1 ,3 1 3 - 2 ,7 7 4
1Q 08 773 867 658 9 ,6 3 5 437 1 2 ,3 7 0 8 ,8 6 3 3 ,5 0 7 2 ,8 4 4 663 174 489
4Q 07 1 ,6 9 8 831 688 1 1 ,1 3 6 459 1 4 ,8 1 2 1 0 ,4 2 2 4 ,3 9 0 3 ,1 6 0 1 ,2 3 0 344 886
3Q 07 1 ,6 1 2 1 ,0 7 1 674 1 0 ,9 1 0 472 1 4 ,7 3 9 1 0 ,4 3 1 4 ,3 0 8 3 ,1 0 3 1 ,2 0 5 318 887
[LVP % 3 )@ 1q+r /?nCzq(yTP ? /? 1 9 9# 1/ '7/ %XAOGSUVU c RVS
E x p o s u re (U S b n ) R e s id e n t ia l M o r t g a g e C o m m e r c ia l R e a l E s t a t e H ig h Y ie ld A c q u is it io n F in a n c e T o ta l
3Q 08
3Q 08 1 3 .2 3 2 .6 7 .1 5 2 .9
2Q 08 2 4 .9 3 9 .8 1 1 .5 7 6 .2
1Q 08 3 1 .8 49 1 7 .8 9 8 .6
4Q 07 3 2 .1 5 1 .7 2 3 .9 1 0 7 .7
3Q 07 na na na na
tGHS -OQQ 83 '16/?nCzr,TP 80$dKOIMG 9 /?!1/ '7 <5# nCz+qTP !b3/#$@50><?0 [LVPBGOS[ GI6 'nCz*|TP 77
-#3&4% 5"##$!%&'0;<-=>9%+%8&4?
mq?17:LY?OS19:=`LJKS>s1M=1qMOS8Ls1 Company Lehman Brothers Holdings, Inc. Worldcom, Inc. Enron Corp.* Conseco, Inc. Texaco, Inc. Financial Corp. of America Refco Inc. Global Crossing Ltd. Pacific Gas and Electric Co. UAL Corp. Delta Air Lines, Inc. Adelphia Communications MCorp Mirant Corporation Delphi Corporation
-#3&4% qBDB.%7B8
Bankruptcy Date 9/15/2008 7/21/2002 12/2/2001 12/18/2002 4/12/1987 9/9/1988 10/17/2005 1/28/2002 4/6/2001 12/9/2002 9/14/2005 6/25/2002 3/31/1989 7/14/2003 10/8/2005
Total Assets Pre-Bankruptcy $639,000,000,000 (approximate) $103,914,000,000 $63,392,000,000 $61,392,000,000 $35,892,000,000 $33,864,000,000 $33,333,172,000 $30,185,000,000 $29,770,000,000 $25,197,000,000 $21,801,000,000 $21,499,000,000 $20,228,000,000 $19,415,000,000 $16,593,000,000
78
Filing Court District NY-S NY-S NY-S IL-N NY-S CA-C NY-S NY-S CA-N IL-N NY-S NY-S TX-S TX-N NY-S
3,% 1j?q<:=19L8Sq?LO 5 @ j?q<:=1' 1a:=`LJKS1 .#D1 WD3 & #D1j8OO1-'3 *1 $ bn 60
50
55.1
Loss
52.2 49.1
Capital Rasied
times 1.80
Cover Loss Ratio
1.60 44.2
1.40
40
1.20 29.9
30
1.00
27.9 27.4 22.7
20
0.60 15.7 14.8 14.8 14.3 14.3 13.8 13.9 12.2 12.1 10.4 10.4 10 0.40 9.5 5.8 5.6 0.20 3.2 3
11 10
0.80
23.3
20.7 21.2
5.1
0 Wells Fargo
Credit Suisse
Deutsche
Lehman
RBS
JPMorgan
Washington
IKB Deutsche
Morgan
Bank of America
Wachovia
HSBC
UBS
Merrill
Citigroup
0.00
(#)% *+#,-%.)%$!%& /0112 -#3&4% 5"##$!%&'0;<-=>9%+%8&4? 79
"# $ VD *3,% UVD 15I:xM=YO1:=R1 j8:=@1% ' 3 & 'G12 fdF_ffF
!% 3 /) 6 1 !/)$
g/ryxp> 1^ 831 "<69$6 $#6<8#83 %X 3 /0 >1 !8 # !0 98 # > # Z # ! %# 1 "< "# 1 "< 16/ '76 >;+p1/ '7/6 <qp!1/ '7 '< ?%283 12 #6 16#]]b 6< <66()( ry|, 6<dLKHG CV}HPUI OQ A IMHS ! / := 0 06383 = 0!"0$ 1nCzqpp0!
0"#$ <9 063 \6 1 # %X5 :# 6 b7$#6 !"0 1!
0"#$ <> #Z #/1% 36bnCzr|p '0836
9 c IORMSHOPoGMISDOGKOGVSHOP! <16()( ry|y 9$>
1/9 /3 ! /? 6 1 kMTRHNRe oGV HPVPNHVR DOLKVPH I *+! 3$#%&ry|yryyr:; 6< % / $1 1 >
1= 0 8#% 36br*
80
b8u18=?O1;=R?w1-* & 3VD .1k?O87JSM8=1mLJOS1 N8LK8L:SM8= fdd_ffF Savings and Loan Crisis (1988-1990) 3500
Dow Jones Index
3000
2500
!"
2000
Black M onday 1500
1000 1984
1985
1986
1987
1988
1989
1990
Sources: Bloomberg, TISCO Research 81
"# $ 0 6L?:S1R?KL?OOM8=1>LMOMO1& 'G12 f!F Great Depression Crisis vs Dow Jones Index
Great Depression Crisis Period
Period: 1929-1930s or early 1940s for different countries
A 03-Sep-29 13-Nov-29
..
17/4/30 294.07
A
16/3/37 189.95
B C
13/11/29 198.69
D E
31/3/38 98.95
8/7/32,41.22
82
.
.
.
.
..
..
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
..
..
Magnitude
Duration Months
-48%
2
B
17-Apr-30
48%
5
C
08-Jul-32
-86%
27
D 16-Mar-37
361%
57
E
-48%
13
31-Mar-38
"# $ 0 IS:YQ7:SM8=1>LMOMO1& 'G12 fF Stagflation vs Dow Jones Index
Stagflation Period
Period: 1970s
. .
A 14-May-69 26-May-70
. .
.
.
-35%
13
28-Apr-71
51%
11
C 23-Nov-71
-16%
7
11-Jan-73
32%
14
E 06-Dec-74
-45%
23
F 21-Sep-76
76%
22
G 28-Feb-78
-27%
18
B
.
B
G
D
D
Duration Months
Magnitude
C
. .
F
E
A
.
.
. .
. .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
..
..
83
"# $ 0 :K:=1NLMOMO1M=1fdd_ffF01rQQ?>SO18Q1ISL8=Y1}?=1NJLL?=>s Japan Crisis
Japan's Lost Decade Period
Period: late 1980s and early 1990s
A
494%
121
B
01-Oct-90
-48%
9
..
C
29-Mar-91
31%
6
C
D
18-Aug-92
-46%
17
B
D
A
.
. .
84
..
..
..
..
..
..
. .
.
.
.
.
.
.
.
.
.
Duration Months
07-Jan-80 29-Dec-89
. . .
Magnitude
"# $ 0 {OM:=1NLMOMO1& 'G12 ff Asian Financial Crisis vs MSCI Emerging Market Index
Asian Crisis Period
Period 1997-8
A
. . u
..
-38%
6
21-Apr-98
25%
3
C 10-Sep-98
-46%
5
83%
10
B
A
B
..
.
D
C
Duration Months
09-Jul-97 12-Jan-98
.
Magnitude
05-Jul-99
D
..
...
..
..
..
..
..
.
.
.
.
.
..
.
.
.
.
.
.
85
"# $ 01 WD3 % o 2 W"U,T& -,1H 1f1* * & U 12 5ff_FF1 2,000,000
Bt,m
time (X) 544% 5.0
Capital raising (Bt,m) % of total asset
1,500,000
4.0
% of total Equity
1,000,000
3.0
275% 203%
2.0
500,000
1.0
6% 0
6%
55%
1997
1998
1999
2000
2001
2002
Total 1,925,731
20,162
972,020
718,840
194,115
78
20,515
% of total asset
0%
15%
11%
3%
0%
0%
29%
% of total Equity
6%
275%
203%
55%
0%
6%
544%
Capital raising (Bt,m)
0.0
Source: TISCO Research
%m99?>
1 #Z/$ = 0 '16/?=%80$9$nCCq(.,8083>< %X
'16/? '<" " /? %X #$p(x /#8 #
'16/? 6< /
'16/?>
1=/!"#$2$3$1 1993=6#6 > % / = 0 <9 !%&()( ryyx-*pp*% 3 /)=/% 3%m]CSGVS UHNk83 9 jAD#"0/!0 'b1"7 !=/9 '16/?6 $#$69 %X 86
Q&A
87
! )
"# $ % & # '( %* * '+ , - #./
2
%
!"#$%&'()( *+,,-*+,./!0 1 2$345#! 16/ '7
6 %# 50/#83 08 95!9! 506:; %#1 "</=6# 636
>
19$6 %#1 "<:=' 76 6$ >?% 37 '< # =%
58 2 /=6# ?6 ''
@ 8//5 /
1% 3 2/ABC83DEF/ $0 1 "<:=' 76/!0 1 /?!
#9$6
@50:< % 3 2/ABC83DEF/ $0 1 "<:=' 76';'1 $6# "<><6
1=%
% 3 61#" "$6 GHIJKG LHML /@1 ' <9 666 1! "1$ 6 1=%
$ 2$3 16/ '7
6$6 80 !@% 3"7 NOPQRHNSIOQHPS G IS #$9 $6# "<>< 3
01 23-3 3& 41 56789:71;<9:7:=>?@
4
AB C & #D ,C ,% 2 . #., #D& EF'G , %, * &3 & Unit, th 1,400 New Single-Family Home Sales
1,200 1,000 800 600
+14.6 yrs
400
+4.6 yrs
+2.8 yrs +3.9 yrs
515
Note: As of July 2008
5
Sources: Bloomberg, TISCO Research
4, , #.,DH '+ #DH&* 1IJ9KLM
%
Fed Funds Rate
7 6 5 -5.5%
4 3 2
2.00
1
Note: As of August 2008 Sources: Bloomberg, TISCO Research
6
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
0
Jan-08
Jan-05
Jan-02
Jan-99
Jan-96
Jan-93
Jan-90
Jan-87
Jan-84
Jan-81
Jan-78
Jan-75
Jan-72
Jan-69
Jan-66
Jan-63
200
2 * ' C%$. '+ ' "T 2 * & YoY (%) 20
S&P Case Shiller Home Price Index
15 10 5
+130%
0 -5 -10 -15 -20
Note: As of June 2008 (Quarterly)
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-93
Jan-92
Jan-91
Jan-90
Jan-89
Jan-88
-15.4
7
Sources: Bloomberg, TISCO Research
' , UVD 1OJ9KLM
% MBS Issuance
500 450
Annual Subprime Issuance
400
Percent of Total MBS Issuance 363
465
25
449
20
350 300 250 200
15 195
10
123
150 100
202
87
5
52
50 0
2 0 2000
2001
2002
2003
Note: As of June 2008 Sources: Freddie Mac and Fannie Mae, TISCO Research
2004
8
2005
2006
2007
Jun08
UVD #D ,C ,* ,2"AW15IJ9KLM
1 "<:=' 76< %#1 "<!08 #5 /6% 3$ 1/
1=6## < %#1 "<!08 #?/ #93@1 " 3
1 "<:=' 76% 3 0$1 "< '</5#) IMTKGHL LOGSUVU I W1 "<
> 7 IMTKGHL NVGROVPI W1 "<
1 IMTKGHL NG HSNVG I %X 0
9
Source: Wikipedia
UVD 1OJ9KLM
20%
15%
13% 9%
10%
5%
5%
0% 1994
1996
1999
10
Source: Wikipedia
2006
H-3 UVD 1OJ9KLM
Shares of the US loans Outstanding
Subprime ARM, 6%
FHA, 8%
Subprime Fixed, 6%
Prime ARM, 15%
Prime Fixed, 65%
Note: As of March 2008
11
Sources: MBA, TISCO Research
] -W T33C -* , - ' W,T '+ 15O?>JLMSM^:SM8=@ Mortgage Broker Loan Proceeds
Borrower
Lender Loan Loan
Monthly Payment
Servicer
Cash
Trustee
Monthly Payment
Underwriter
Issuer
Securities Cash
Rating Agency Monthly Payment
Credit Enhancement Provider
Investors 12
Source: Wikipedia
' W,T '+ 15O?>JLMSM^:SM8=@12V - /
C NMGHSHYVSHOP< 3$ 8%1/ '7/11 "< /5#)69 $6 0 0$ 83 6 %X /
1 6 / '7 #% 3
/
1 #>5 $#<8LSY:Y?_9:>`?R1O?>JLMSM?O15XaI@
N877:S?L:7M^?R1R?9S1897MY:SM8=O15Nbc@ %X /
1/6 / '7% 3 /
1 9
$6 0 0$ ' W1 "< #Z <ABC
DEF933/0% 3 2/83$6 /8 # :;$68 # 6 93 98 =% %X#$Z SGVPN[ I 83!8 #3#$ \936$68 # / < $! =>#>W$6 83
Sources: Wikipedia, Investopedia, The Hand Book of Fixed Income Securities 13
de1% 2 V 1 '+ C #.' A1OJ9KLM
* ,% C*3# * H 3' A UVD 15 3C*3# * 1Ffgf!gFFF1 @ 40% 34% 31% 30% 22% 20%
8%
10%
0% % Homeowner with Prime Mortgage
1
% Renter
1
% Homeowner (no 1 mortgage)
% Homeowner with Subprime Mortgage
5%
% Homeowner with Alt-A Mortgage
Census Bureau data
2
Estimated methodology: Using the number of loans outstanding in the Loan Performance and EMBS database, adjusting upward for the database capture rate (which is not 100%), and then also adjusting upward based upon reported estimated of securitization rates, by product type. The resulting estimate of the total number of loans extant by product category is then divided by the number of households. * First-liens only, to avoid double counting Sources: eMBS, Loan Performance, Deutsche Bank
14
3 ' , UVD 5C 3V @, , 3 3 #.,C* * % C #.* ,2"AW C #.U . # 3.0%
2.8%
2.5% 2.0% 1.5%
1.3%
1.0% 0.5% 0.0% 2001
2007
15
Source: Wikipedia
' A1OSLJ>SJL?R1>L?RMS1 4 , Z ' A1ISLJ>SJL?R1QM=:=>? 013 2V - H-3$ WD33%$. / billion US$ 3500 CDOs 3000 2500
ABS MBS
2000 1500 1000 500 0 2000
2001
2002
2003
2004
2005
2006
2007
Note: CDOs = collateralized debt obligations; ABS = asset-backed securities, including auto, credit card, etc., and excluding MBS; and MBS = mortgage-backed securities, excluding U.S. agency MBS. Source: IMF
16
* ' A1X8LSY:Y?1a:>`?R1I?>JLMSM?O15XaI@ MBS Subprime Mortgage Loans
Investor AAA
Lender
80%
Investor .
SPV Payment
AA
11%
.
A
4%
.
BBB
3% 2%
Investor
BB-Unrated
17
Sources: TISCO Research, IMF
* ' A1N877:S?L:7M^?R1b?9S1c97MY:SM8=O15Nbc@ Subprime MBS
ABS CDO
AAA AA A BBB BB-unrated
AAA AA A BBB BB-unrated
62%
Junior AAA
14%
AA
8%
A
6%
BBB
6% 4%
Investor .
SPV
. . AAA AA A BBB BB-unrated
BB-Unrated
18
Sources: TISCO Research, IMF
Investor
Senior AAA
. . Investor
* ' A1N877:S?L:7M^?R1b?9S1c97MY:SM8=O 5Nbc @ ABS CDO
ABS CDO
Senior AAA Junior AAA AA A BBB BB-unrated
2
Senior AAA
Investor 60%
Investor
Senior AAA Junior AAA AA A BBB BB-unrated
SPV
Junior AAA
. . Senior AAA Junior AAA AA A BBB BB-unrated
. 27%
AA
4%
A
3%
BBB
3% 2%
BB-Unrated
. . Investor
19
Sources: TISCO Research, IMF
UVD #D ,C ,* ,2"AW &[ C '3 '+ UVD #D ,C ,* ,2"AW#D C '3 '+
80%
75%
70% 60%
54%
50% 40% 30% 20% 10% 0% 2001 Source: Wikipedia
2006 20
23 UVD V #-D 3 333# H&*3#23 23 UVD V #D C' & U 'G5EEF_W EE@ Subprime Residential Mortgage-Backed Securities (originated since 2005) B
BB
BBB
A 1 category
AA
2 categories AAA
3+ categories 0
20
40
60
80
100
Downgrades from original issue rating (in percent) 21
Source: IMF
hij1% UVD #D ,C , 1 WD3%$. , Z& 11 V #D 3 UVD * #D UH #.&
%
Prime (Fixed)
%
Prime (Adjustable)
7
Subprime (Fixed)
Subprime (Adjustable)
30
6.8
26.8
6
25
5
20
4 15 3
9.6 10
2
1.3 5
1
Sources: Bloomberg, TISCO Research
22
Mar-08
Sep-07
Mar-07
Sep-06
Mar-06
Sep-05
Mar-05
Sep-04
Mar-04
Sep-03
Mar-03
Mar-02
Mar-08
Sep-07
Mar-07
Sep-06
Mar-06
Sep-05
Mar-05
Sep-04
Mar-04
Sep-03
Mar-03
Sep-02
Mar-02
Note: As of June 2008
Sep-02
0
0
AW , -3 %*CA ' #.,1j;ack1 l 2 15m_9M77@ bps 350 TED Spread
300 250
250.0
200 150 100 50 Sep-08
Aug-08
Jul-08
Jun-08
May-08
Apr-08
Mar-08
Feb-08
Jan-08
Dec-07
Nov-07
Oct-07
Sep-07
Aug-07
Jul-07
Jun-07
May-07
Apr-07
Mar-07
Feb-07
Jan-07
0
Note: As of 23 September 2008 23
Sources: Bloomberg, TISCO Research
"#$%&'($)*+,'-.*/0"(-1 Premium CDS
!" #$%&'
Physical or cash settlement
A
Seller
Nothing
B #$01 A
2)'3$#$&45#$%&'$6$7'
B
2)'3$#$&4785#$%&'$6$7'
NbI< ?'7"1 ;:; %X]]//; 3$#^_ /`@50:<a93/ " 3 1!0 `@50a! // %X 33Z KG LHML 8 % 1/1!
@ 8/ ! b/ 1 063 < 6 $66 >! " 3`?/6 <#$01a c Q G PN dPSHSe :;0 :<% 3 28;
24
&U* 1NbI 1 WVD 'n 23 #D,1 @50:<?0 506 >6!"0%f $6 = 09 /=6#= 0 1 0<
0:<DEC :; 01 `#$01 <?0 50aZ 1 WVD ZH- 1 /?/$ \ = 6 > 0=%/?!DEC 6 >/93= 0@ 8/#5 6 >/93 b7
%8% 1 1g/ #Z= 0#>5 0 $# "#@50/ b7$#`#$01a93=6# 1 @1 " 3 \6 > 0=% %h >3 %X@50DEC= 0
25
C&& Ho 31NbI1% p I<88SqM=Y1r:L=M=YO 6 ]"ijjk 83ljC /?!DEC '< %X
% 3 DEF /!0 >
1=6# 0/; % % ?]"DEF !0 %X%m99?5# 6 LVGJ-SO-LVGJ S 1g/ 0
@ /? \ # 6< DEF/><5#6 ##>$
1k?>8Y=M^M=Y1r:L7s1iL8QMS ; ?@/ %X8 95!9! /?
6DEC \< /; @ = /93 1 ;! 6=$0! %m99?/6 $# "# 1g/j/?!DEF 0$IKG V /6 $#nCoG VIMGH I5#+pTK! b3 $ \= 0=%:<DEC / ' 66*p TK@'7/ 1 ; \< 1g/j 6 >]"@ # qpTK %X@ = 33 $/>< DEF
26
tqs1R81NbIO :QQ?>S1u8L7R1?>8=8<s/ r(
%m]/ 1 9 5#]]@1 " 3 NOMPS GKVGSe GHIJ <9 =6#6 s 3 ?6#
#
*(
%X /93$#! <5#]] NOMPS GKVGSe /8/09 1 <9 /@50:<83@50]] 16 # \68 3 ?0/93=%/ :< # %X/ Z 5#]]<Z
q(
/1001DEC !"#$ 33 %X DEFI6 ;:;=%5# DECI>06 /? "#jli @ /?9 tGHS OuP DECII>;rr'0
] 6< 0%&/@#6
,(
690/ $9 >< DEC 'b1"7!% 3 /) /# =6#= 069 ?6=%>;$b1" 19 < v 974m 7:; %X ?#6]/ DEC!
1
+(
EOLHPOdQQ NS=%/$%<Z "#? %83 "
A1NbI14, 3
3C2 4, 3& % 1NbI1 #. ,C #D' 3"1v1* * T 27
NL?RMS1b?Q:J7S1Iu:K1IKL?:R ;=R?w 4 *31NbI1IKL?:R13#23 , 3& U 11 'T#D 31 CDX North America Investment Grade Index
bp
iTraxx Europe Index
!"##$!%&'
4/9/2008
18/9/2008
21/8/2008
7/8/2008
24/7/2008
10/7/2008
26/6/2008
12/6/2008
29/5/2008
1/5/2008
20/3/2008
24/9/2008
10/9/2008
27/8/2008
13/8/2008
30/7/2008
16/7/2008
2/7/2008
4/6/2008
18/6/2008
7/5/2008
21/5/2008
23/4/2008
9/4/2008
26/3/2008
90 70
15/5/2008
170 150 130 110
3/4/2008
210 190
17/4/2008
bp 150 140 130 120 110 100 90 80 70 60
!"##$!%&'
h8S?01;=R?w12H "1OKL?:R1% 1 1NbI1#D ' 23 #D,&* 1E1 ]$D-* 2 & 1 M=x?OS
28
A 1NbI1 D44, 3 NbI1X:L`?S1IM^? 9 : ; < =>?@3$27'$#7*'&87*,-.*/4*7%($#&6*'&6$4A4485&*'&8702-(A1 US$,tn 70 60 50 40 30 20 10 0
% % CDS 5* * T @ (1) mid-2006
mid-2007
mid-2008
!"##$!%&'
end-2006
mid-2007
end-2007
34.5
45.5
62.2
!"##$!%&'
0B1
78'&87*,*C8+7'878+'4'*7%&7DE@"5#$%&'%$)*+,'4.*/4
29
yv1SLM77M8=1X:L`?S1IM^?1zz j?x?L:YM=Y1rQQ?>S 3C2 % 1NbI1 C3 VD 3 Ho 3#D VD '+ C4] & 1cmN , 3 D 1 , , U 1 1{1 V 1Nbc1 3C2 1yF1 <M77M8=1 ,C ** ' 23 #D,4, ]V. 1 NbI1 1a13C2 * l1yF1<M77M8=1*, U #, 1 Ho 3 -3 -* W#, 2 . 1& 2 1{1 Z 23 #D,% 1Nbc1#D V ,C 1 1{13 ZH- WVD Z % 1OKL?:R14, -' %, 1NbI1&* VD -'-* #1 V 1a1 * H 1q?RY?1 o 3#D H-'4,-']V. 1NbI1 #D3#2"3 3V 2C 2*2 VD #D3#23 Z3& %,1 V "##D 1|1 1}13#333 , * #.#D 1$H ]V. %, 1NbI1 1 Z -* & "# #.13C2 % , * V 1Nbc1 . 3# W#, 2 1yF1<M77M8=1 3C2 % 1NbI1#D * 1Nbc1 #. 3 #, ,C & . 3#3 1yF1<M77M8=
30
~ % 1M=:=>M:71NLMOMO01 D3'([1{OO?S_a:>`?R1I?>JLMSM?O Fe1% '([1{OO?S_a:>`?R1 *, WD3 *1 "8CC$#5&*,F*/$#G A44$'H*5I> G J-KBLMNNH7O 9PQN R J-KSBQH7O >R T?T QB
U8#,%*55+C+,*'$%5*/&'*,#*&4$%V,844 ?W<XYNTZ<
Asset-Backed Commercial Paper - SA Total Commercial Paper -SA Financial Commercial Paper - SA
US$, bn 2,500
2,000
1,500
1,000
Jul-08
Jul-07
Jan-08
Jan-07
Jul-06
Jul-05
Jan-06
Jul-04
Jan-05
Jul-03
Jan-04
Jul-02
Jan-03
Jul-01
Jan-02
Jan-01
(#)% *+#,-%.)%$!%& /0112 -#3&4% 5"##$!%&'06%7%&8"9%+%&:%0;<-=>9%+%8&4?
31
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Source: Reuters
35
3 *-%'([ 15 1 3 #D 3 WVD '([ 1j?x?L:Y?1L:SM81% 3 #D ,C & C US Top Commercial Bank (US$, m) Citigroup Merrill Lynch JPMorgan Morgan Stanley Wachovia Bank of America Washington Mutual Lehman Brothers Wells Fargo Goldman Sachs Other Company (US$, m) Freddie Mac Fannie Mae AIG International Top Commercial Bank UBS HSBC IKB Deutsche RBS Deutsche Bank Credit Suisse Barclays Capital HBOS Plc ING Groep Societe Generale Mizuho Bnp Paribas
-#3&4% 5"##$!%&'0;<-=>9%+%8&4?
Assets Liabilities Equity 2,100,385 1,963,980 136,405 966,210 931,432 34,778 1,775,670 1,642,494 133,176 1,031,228 996,735 34,493 812,433 734,274 78,159 1,716,875 1,554,184 162,691 309,731 279,731 30,000 639,432 613,156 26,276 609,074 561,110 47,964 1,088,145 1,039,640 48,505 Assets Liabilities Equity 879,043 865,964 13,079 885,918 844,528 41,390 1,049,876 960,539 89,337 Assets Liabilities Equity 2,077,635 2,025,341 52,294 2,546,678 2,412,667 134,011 50,245 49,061 1,184 1,948,745 1,845,052 103,693 1,990,740 1,957,068 33,672 1,229,825 1,176,988 52,837 1,365,654 1,332,832 32,822 681,404 660,271 21,133 1,369,946 1,339,981 29,965 1,075,925 1,035,687 40,238 154,753 149,425 5,328 1,817,193 1,761,060 56,133
36
D/E 14.40 26.78 12.33 28.90 9.39 9.55 9.32 23.34 11.70 21.43 D/E 66.21 20.40 10.75 D/E 38.73 18.00 41.44 17.79 58.12 22.28 40.61 31.24 44.72 25.74 28.05 31.37
2 % 1&U* 3 1PIyd1* * 15 31m{ki@1 & U , V &
Source: Reuters
Source: Reuters
37
38
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41
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Oct 2 Last day of USShort Selling Prohibit
Oct 14 Earnings Release: - 3Q08 Wells Fargo
Oct 16 Earnings Release: - 3Q08 Citigroup - 3Q08 State Street - 3Q08 Merrill Lynch
Oct 15 Earnings Release: - 3Q08 WAMU Oct 17 Earnings Release: - 3Q08 Bank of New York Mellon - 3Q08 Northen Trust
Oct 20 Earnings Release: - 3Q08 Bank of America
Oct 30 Earnings Release: - 3Q08 UBS
Oct 23 Earnings Release: - 3Q08 Credit Suisse
Nov 20 Earnings Release: - 3Q08 Freddie Mac
Nov 7 Earnings Release: - 3Q08 Fannie Mae - 3Q08 AIG
Oct 22 Earnings Release: - 3Q08 Wachovia
Dec 18 Earnings Release: - 4Q08 Goldman Sachs
Dec 12 Earnings Release: - 4Q08 Lehman Brothers
Dec 19 Earnings Release: - 4Q08 Morgan Stanley
@ 3//=6#= 0% ;9 % 3 )@ 1!"#$/@ #6 @ 3//6 #>
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+( 6A> Bond Debt Bond Debt Bank Loan Bank Loan Bank Loan Bank Loan Bank Loan Bank Loan Bank Loan Letter of Credit
46
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' Z #D* 315 @ b8<M=81rQQ?>S1'([ % 1#D3# & ,4 '
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47
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Credit Default Swap
Derivatives
Financial guarantee
IAS 39
IAS 37
- Payment is contingent on an event other than default by reference entity - Recognition when "Credit event" such as ratings downgrade or a change in credit spread - Most CDS define a credit event
-#3&4% <*-0;<-=>9%+%8&4?
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48
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4 '([ #DH 3 '+ A , A 41'G1E Real GDP YoY (%)
Country
Consumer Prices YoY (%)
2007 4.7 2.1
2008F 3.6 1.3
2009F 3.0 0.9
2007 3.6 2.1
2008F 5.6 3.7
2009F 3.9 2.4
US Japan Euroland
2.0 2.0 2.6
1.8 0.2 1.2
1.1 0.4 0.1
2.9 0.0 2.1
4.7 1.4 3.6
3.1 0.3 2.5
Asia (ex. Japan) India China
9.4 9.3 11.9
8.0 7.7 10.1
7.1 6.3 8.9
4.3 4.6 4.6
7.4 9.6 6.5
5.2 6.3 4.0
EMEA Latin America
6.7 5.4
6.2 4.3
6.4 3.7
10.5 6.2
12.3 7.3
9.4 6.6
World G7
(#)% *+#,-%.)%$!%&0112 -#3&4% F%3)+4?%58AD
49
#.,?R1J=RO1k:S?
b3
6
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50
15 @ 2 T
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51
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J-D86$#7C$7'43&)'%8.7.*#%C8#$'3*7MQH/ (%)
%
1.50
1.75
2.00
2.25
4.5
100 90 80 70 60 50 40 30 20 10 0
4.0 3.5 3.0 2.5 2.0
-#3&4% 5"##$!%&'
16-Sep-08
9-Sep-08
2-Sep-08
26-Aug-08
19-Aug-08
5-Aug-08
12-Aug-08
29-Jul-08
22-Jul-08
8-Jul-08
15-Jul-08
1-Jul-08
24-Jun-08
17-Jun-08
10-Jun-08
1.5 1.0 1/1/08
2/12/08
3/26/08 US2YY
52
5/7/08 US5YY
6/19/08
7/31/08
US10YY
9/11/08 tenor (yrs)
15 @ #.,?R1J=RO1k:S?15 @
27&'&*,a8H,$44",*&C4W > 9
_$%_+7%4b*'$ J-J7$C/,8`C$7'#*'$ %
450
6 7
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-90
8
Jul-08
Apr-08
Jan-08
Jul-07
Oct-07
Apr-07
Jan-07
Jul-06
Oct-06
Apr-06
Oct-05
Jan-06
Jul-05
250
5
Jan-93
300
4
Jan-92
350
Apr-05
%
Unemployment Rate (Inverted)
3
Jan-91
Initial Jobless Claims (4 Weeks MA) 400
Jan-05
Fed Funds Rate (LHS)
9 8 7 6 5 4 3 2 1 0
53
-#3&4% 5"##$!%&'
15 @ 1NL?RMS1LMO`1 #.%
:^G> > Xc?_$%_+7%4b*'$R Md^
"#$%&'#&4I] 9 Y:]ec ?< < RY
(%) 6.0
Fed Funds Rate
3m USD swap OIS
Spread of Libor to Overnight Index Sw aps
bp 140
3m LIBOR
5.5 5.0
120
4.5
100
4.0
80
3.5
54
S e p -0 8
J u l- 08
A u g - 08
Ju n - 08
M ay-0 8
A p r-0 8
M ar-0 8
F eb - 08
J an - 08
D ec- 07
N o v- 07
O ct- 07
S e p -0 7
J u l- 07
A u g - 07
Sep-08
Jul-08
Aug-08
Jun-08
Apr-08
May-08
Mar-08
Feb-08
Jan-08
Dec-07
Nov-07
Oct-07
Sep-07
Jul-07
Aug-07
Jun-07
May-07
Apr-07
Feb-07
Mar-07
Jan-07
-#3&4% 5"##$!%&'0;<-=>9%+%8&4?
Ju n - 07
0
1.0
M ay-0 7
20
1.5
A p r-0 7
40
2.0
J an - 07
2.5
F eb - 07 M ar-0 7
60
3.0
15 @ 1H ,C& U % #.15b?_7?x?L:Y?@ US Commercial Assets/Equity
times
15 @ "T * & 1, 2 UH #.C , V D % 30 25
Subprime (Fixed)
Subprime (Adjustable)
Prime (Fixed)
Prime (Adjustable)
20 15 10 5
-#3&4% 5"##$!%&'
56
Mar-08
Sep-07
Mar-07
Sep-06
Mar-06
Sep-05
Mar-05
Sep-04
Mar-04
Sep-03
Mar-03
Sep-02
Mar-02
0
Jul-08
Jul-07
55
-#3&4% 5"##$!%&'0;<-=>9%+%8&4?
Jan-08
Jul-06
Jan-07
Jul-05
Jan-06
Jan-05
Jul-04
Jan-04
Jul-03
Jan-03
Jul-02
Jan-02
Jul-01
Jul-00
Jan-01
Jul-99
Jan-00
Jul-98
Jan-99
Jul-97
Jan-98
Jul-96
Jan-97
Jan-96
Jul-95
Jan-95
Jul-94
Jan-94
15 14 13 12 11 10 9 8 7 6 5
15 @ 23 & H-'C 3 #DU Real GDP (LHS)
YoY (%)
Initial Jobless Claims
YoY (%)
Continuing Jobless Claims
10
-40
8
-10
6
20
4 50 2 80
0
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
140 1972
-4 1970
110
1968
-2
57
-#3&4% 5"##$!%&'0;<-=>9%+%8&4?
15 @ A UVD $ 3 UVD #D ,C ,-' $ UVD WVD 4A2 %
-#3&4% 6%7%&8"9%+%&:%
58
2Q08
90 80 70 60 50 40 30 20 10 0 -10 -20 4Q06
2Q05
4Q03
Subprime Nontraditional Prime
4Q00
2Q99
4Q97
2Q96
2Q93
4Q91
2Q90
90 80 70 60 50 40 30 20 10 0 -10 -20 -30
4Q94
Other Consumer Loans Mortgage to Individuals Consumer Credit Cards
2Q02
%
PI1 8JO?1KLM>?1R?>7M=?1<:s1q:x?1QJLSq?L1S81Y8 2 * & 13# 4 *3#D -'1 5 3VD ' #, #, & #% ' W ~ *@
Source: OECD, DB Global Markets Research T marks the year of the peak in prices; T-5 and T+5 the years before and after 59 the peak.
6L8uSq17M`?7s1S81L?<:M=1O7JYYMOq1Q8L1O?x?L:71s?:LO 43# 4 *3#D '+ ,'G1 5 3VD ' #, #, & #% ' W ~ *@
Source: IMF, DB Global Markets Research T marks the year of the banking crisis; T-5 and T+5 the years before and after the crisis. 60
rJMSs1<:L`?SO17M`?7s1S81L?>8x?L1:q?:R18Q1Sq?1?>8=8<s * 3# B Z WV. 1 5 3VD ' #, #, & #% ' W ~ *@
Source: Datastream, S&P, DB Global Markets Research T marks the year of the banking crisis; T-5 and T+5 the years before and after the crisis. 61
PI1<8=?S:Ls1?:OM=Y1J=JOJ:77s1:YYL?OOMx? 4, , % 13# 4 *3 2,3%$. 1 5 3VD ' #, #, & #% ' W ~ *@
Source: BLS, FRB, Haver, DB Global Markets Research T marks the year of the banking crisis; T-5 and T+5 the years before and after the crisis. 62
IMY=MQM>:=S1QMO>:71?:OM=Y1K:LS18Q1Sq?1OS8Ls 4, , 2 % 13# 4 *3 2,3%$. 1 5 3VD ' #, #, & #% ' W ~ *@
Source: Datastream, DB Global Markets Research T marks the year of the banking crisis; T-5 and T+5 the years before and after the crisis. 63
4 4 *3 #,. 4, ,' % ' p1H ,C& %
+( 6>J JEB>op 1KnB8 ;>T
(#)% *+#,-%.)%$!%&0112 -#3&4% F%3)+4?%58AD0;<-=>9%+%8&4?
+( 025#2(7%(27#6=H/I/=2/ 3 6G7 6 6G7 12 6G7 +DEEF= 2.00 2.00 2.00 2.00 4.25 4.25 4.00 3.50 5.00 5.00 4.75 4.00 0.50 0.50 0.50 0.50 4.14 4.14 4.14 4.14 3.50 3.50 3.50 3.50 9.00 9.25 9.25 8.00 5.25 5.25 5.00 4.50 3.63 3.25 3.00 3.00 3.75 3.75 3.75 3.75
64
3 *-%'([ 15 @ NbIO1' # .& 1 ,4 '1 3#3 U , V & #D1d1, E bp
bp
230 210
160
US CDX Index
140
190 170
Europe CDX Index
120
150 130
100
110
80
90
60
70
(#)% =FH
-,01'G1EE1'G 23 ' 2*C % 4 US$, m
YoY (%) Trade balance (RHS)
60
Exports
Imports
3,000
50
2,000
40 30
1,000
20
0
10 -1,000
0 -10
-#3&4% 5#;0U#=0;<-= rel="nofollow">9%+%8&4?
66
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
-2,000
17/9/2008
3/9/2008
20/8/2008
6/8/2008
9/7/2008
23/7/2008
25/6/2008
11/6/2008
28/5/2008
14/5/2008
30/4/2008
16/4/2008
19/3/2008
9/9/2008
26/8/2008
12/8/2008
29/7/2008
15/7/2008
1/7/2008
3/6/2008
17/6/2008
20/5/2008
6/5/2008
22/4/2008
8/4/2008
25/3/2008
2/4/2008
40
50
-,01'G1EE1'G 23 ' 15 @ h?S1N:KMS:7178u1, 2-* '([ US$, m
Current A/C
Net Capital Movement
Baht (RHS)
Bt/US$
9,000
31
7,000
33
5,000
35
3,000 37 1,000 39
-1,000
Jul-08
Jul-07
Jul-06
Jul-05
Jan-08
43 Jan-07
-5,000 Jan-06
41
Jan-05
-3,000
67
-#3&4% 5#;0;<-=>9%+%8&4?
-,01'G1EE1'G 23 ' 15 @ * Bn , 23# ,C -3 'G1E YoY (%)
YoY (%) Headline CPI
12
Core CPI
PPI (RHS)
25
10
20
8 6
15
4
10
2 5
0 -2 Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
0
-#3&4% U#=0;<-=>9%+%8&4?
68
O L Q VO VWX L YZ [Y\ ]O VO VWXLJ^VO L^L J^ O ] _˞%& _&B4%
J^ JLOM La OVYd Y\ V^O L QVO VWX L J P P NLOJ e e O e VLO ^ O VO VWX L VJ a O OYZ
-,01'G1EE1'G 23 ' 15 @ 1, % .H #D ' #., 4, ,& ,11'G%* *
% 6
Forecast
5 RP 1-day
4
3 2 1
Jul-09
Jul-08
Jan-09
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jul-04
Jan-05
Jan-04
Jul-03
Jan-03
Jul-02
Jul-01
Jan-02
Jan-01
0
8 8 0 1 4f / / !0 $69 %X / 0 % '1 6 #= \ 6$6 0 "3 $ ) g 190 1 $#/93= 0 \ ! b / # 83 ? 0 83# @ # ) g 1 9 # " 99;93 \ / 8# % 3 /)=/93 6//$ < /? 3$# % 3 /)/ 6 5# 6 / !0 %/(=6# 9 %X 0 !"0 6 0 '< g
rel="nofollow"> 2' 8 %
69
-#3&4% 5#;05"##$!%&'0;<-=>9%+%8&4?
% -,01 #. 3* '#D, '% #., 4, ,% -, 13# #D 2* % 6 RP 1-day
Fed Funds Rate
5 4 3 2 1
-#3&4% 5#;05"##$!%&'0;<-=>9%+%8&4?
70
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
Jul-04
Jan-04
Jul-03
Jan-03
Jul-02
Jan-02
Jul-01
Jan-01
0
% -,0 #.15 @ 2VD -% W o -, 1-3 3# ,H2 []$D 1 ?!BN9P f
g?
?!M9P f
g?
0.08
2Yrs TH bonds and US bonds movement
0.04
0.06 10Yrs TH bonds and US bonds movement
0.03 0.04
0.02
0.02
0.01 0
0 -0.1
-0.08
-0.06
-0.04
-0.02
0
0.02
0.04
0.06
0.08 -0.2
-0.02
-0.15
-0.1
-0.05
-0.01
0
0.05
0.1
0.15
-0.02 -0.04
-0.03 -0.06
-0.04 -0.05
9 ); g'$#
%8% @ 8/'
=/ ] # 6$#6%m99< <9 %m99 0 / 3/ # ' =/ "#%m99 0
6<83 6 0 ) g 19 ! 33%m99
6</ 16 16#@/!0 H R DMG} 0 %XOGLVR H R NMG} $6@@$! ' %&093 9 8$06 /6 $6@@$ !%&*++*
-#3&4% ;?8B5U*05"##$!%&'0;<-=>9%+%8&4?
71
o 2 W"U,T' -,01 "#1j?q<:=1aL8Sq?LO 4, A2 o 2 -3 '+ ,H2 [14,o W-* 3#D 1 Oa ` a fg^Lhg^ Y NLO i%?$8A5&#)?%&+ eOe [j ^ PfJ ^Lg JK O^ Q^h JkgY b Q Q ^f J^ Oa eO e` [l eO eV J ^Q ^ e Q^LgahYZ e NLOh J m
BBL
Oa ` a fNLOi%?$8A5&#)?%&+ eOe j Q^gNgY ` [l n Na O^ oPfgVYpVPQ V N]Q^Q VJ NLOVP Na Oa
e P fOa V O[j/mNLOgahYZ V^ e
SCB
72
0.2
o 2 W"U,T' -,01 "#1j?q<:=1aL8Sq?LO o 2 -,1 o 2 # ,o,1-* W#, * 3 & 1Nbc
<9 CDO/KTB83BAY = 0=%/? %X / %X corporate-backed securities /6 $# rpp 1g/"! 6 1 %X@50 Lehman Brothers %X;! rpp 1g// %X@50 CDO 9;6$#@ 3/93 %X/06 9 CDO / 0mark-to-market!/? $ ]"
Scenario analysis for BAY and KTB on CDO losses
Exposure on CDO (Bt,m) Amount already reserve (Bt,m) Net exposure on CDO Net profit'08F
BAY Amount 2,857 1,451 1,406
% 51 49
KTB Amount 5,360 3,582 1,778
7,172
% 67 33
13,672
Additional % impact Additional % impact reserve to net reserve to net (Bt, m) profit (Bt, m) profit Expected CDO loss / total investment value
KTB
60% 70% 80% 90% 100%
BAY
263 549 835 1,121 1,406
3.14 6.54 9.95 13.35 16.76
0 170 706 1,242 1,778
Source : TISCO Research
73
o 2 W"U,T' -,01 "#1j?q<:=1aL8Sq?LO o 2 -,1 2 -, o 2 4*1-3 -* ' ,C*&* C% 1j?q<:=
KBANK 330 ( KBANK, SCIB,83TISCO = 06 %#1 "<
!0 1g/5 Lehman !? 19 16/ '7 #= \
#=6#= 0 @ 3/ <9 65# % 3 5>;*-, /#65#1 "< 9
# = 0 1/1
1!# "# 1/ '7 %X% 3 0$
SCIB 1,000 (
TISCO 1,300 (
74
0 0.87 3.61 6.36 9.1
o 2 W"U,T' -,01' Z #D* 3 & ' 2 '+ W#,1ve1% W,T 3 .3
/?! #% 3 /) 'b1"71 %X #$ 'r(. 1/ '7/6 ! 3 /?!?0 50 #% 3 /)1 %X 'rq?0 50/6 ! 3
6$#$1 >
1! 65# 'b1"7=/9= 0 @ 3/ '16 169 NOMPS GKVGSe GHIJI83@ 3/9 >
1< w'3>
1 "/ 61= 0 06"#$ < #= \ / =/#$!]#/?! #% 3 /)/6 % 3 $# %X "#$ $6 = 0 ! 3 ; Bt ,bn 250
32
$50m in CDO (100% provisioned) Bt 3.5bn exposure in Lehm an
$50m in CDO (97% provisioned) $1bn st ruct ured not es (principal guarant eed) (< 1% provisioned)
$85m in CDO (51% provisioned)
200 150 100
$160m in CDO (67% provisioned)
11
3
7
209
50
109
106
105
14
79
9
13
64
61
SCIB
BAY
KTB
3.3% 14.7%
1.2% 12.2%
0 Foreign BBL bonds: % assets 2.0% % equity 13.2%
SCB
TM B
KBANK
1.0% 9.3%
0.4% 2.5%
0.7% 6.3%
1.0% 17.2%
29 31 BT
Foreign Bond, Trading Foreign Bond, AFS Foreign Bond, HTM Local Bonds
13.9% 48.2%
75
"# $ 01 3,% 1j?q<:=19L8Sq?LO tqs1Sq?s17?S1j?q<:=1RM?1///1
6 < #$ %X*% 3 \< r 0/? 8 0=%m] [LVP %#!006393>5 $#
0=%$ $6 19 < * dKOIMG !#$/ %XE GH}VSH} lPISGML PSI6 > /?= 06 $#dKOIMG /65#83 =6#= 0 $6 06!= 6q:; /?! E GH}VSH} LVGJ S 6 > /?= 06 $# dKOIMG /65#!%m99?= 0 #= \ 60 ?%/= 09 b [LVP <860$#
'16/?/@#6 935#!
3 58 #=6#= 06$6$#$6 >
1936 =%
76
3,% 1j?q<:=19L8Sq?LO L E H R e v e n u e B re a k d o w n (U S m n ) R evenues P r in c ip a l t r a n s a c t io n s I n v e s t m e n t B a n k in g C o m m is s io n s I n t e r e s t a n d D iv id e n d s Asset M anagem ent T o ta l R e v e n u e (-) In te re s t E x p e n s e N et R evenue (-) N o n - In te re s t E x p e n s e I n c o m e b e f o r e p r o v is io n f o r in c o m e t a x e s ( - ) P r o v is io n f o r in c o m e t a x e s N e t In c o m e
-5 ,2 7 3 611 569 6 ,0 6 4 432 2 ,4 0 3 5 ,3 0 6 -2 ,9 0 3 2 ,9 2 1 -5 ,8 2 4 -1 ,8 9 7 -3 ,9 2 7
2Q 08 - 3 ,5 3 4 858 639 7 ,7 7 1 506 6 ,2 4 0 6 ,9 0 8 -6 6 8 3 ,4 1 9 - 4 ,0 8 7 - 1 ,3 1 3 - 2 ,7 7 4
1Q 08 773 867 658 9 ,6 3 5 437 1 2 ,3 7 0 8 ,8 6 3 3 ,5 0 7 2 ,8 4 4 663 174 489
4Q 07 1 ,6 9 8 831 688 1 1 ,1 3 6 459 1 4 ,8 1 2 1 0 ,4 2 2 4 ,3 9 0 3 ,1 6 0 1 ,2 3 0 344 886
3Q 07 1 ,6 1 2 1 ,0 7 1 674 1 0 ,9 1 0 472 1 4 ,7 3 9 1 0 ,4 3 1 4 ,3 0 8 3 ,1 0 3 1 ,2 0 5 318 887
[LVP % 3 )@ 1q+r /?nCzq(yTP ? /? 1 9 9# 1/ '7/ %XAOGSUVU c RVS
E x p o s u re (U S b n ) R e s id e n t ia l M o r t g a g e C o m m e r c ia l R e a l E s t a t e H ig h Y ie ld A c q u is it io n F in a n c e T o ta l
3Q 08
3Q 08 1 3 .2 3 2 .6 7 .1 5 2 .9
2Q 08 2 4 .9 3 9 .8 1 1 .5 7 6 .2
1Q 08 3 1 .8 49 1 7 .8 9 8 .6
4Q 07 3 2 .1 5 1 .7 2 3 .9 1 0 7 .7
3Q 07 na na na na
tGHS -OQQ 83 '16/?nCzr,TP 80$dKOIMG 9 /?!1/ '7 <5# nCz+qTP !b3/#$@50><?0 [LVPBGOS[ GI6 'nCz*|TP 77
-#3&4% 5"##$!%&'0;<-=>9%+%8&4?
mq?17:LY?OS19:=`LJKS>s1M=1qMOS8Ls1 Company Lehman Brothers Holdings, Inc. Worldcom, Inc. Enron Corp.* Conseco, Inc. Texaco, Inc. Financial Corp. of America Refco Inc. Global Crossing Ltd. Pacific Gas and Electric Co. UAL Corp. Delta Air Lines, Inc. Adelphia Communications MCorp Mirant Corporation Delphi Corporation
-#3&4% qBDB.%7B8
Bankruptcy Date 9/15/2008 7/21/2002 12/2/2001 12/18/2002 4/12/1987 9/9/1988 10/17/2005 1/28/2002 4/6/2001 12/9/2002 9/14/2005 6/25/2002 3/31/1989 7/14/2003 10/8/2005
Total Assets Pre-Bankruptcy $639,000,000,000 (approximate) $103,914,000,000 $63,392,000,000 $61,392,000,000 $35,892,000,000 $33,864,000,000 $33,333,172,000 $30,185,000,000 $29,770,000,000 $25,197,000,000 $21,801,000,000 $21,499,000,000 $20,228,000,000 $19,415,000,000 $16,593,000,000
78
Filing Court District NY-S NY-S NY-S IL-N NY-S CA-C NY-S NY-S CA-N IL-N NY-S NY-S TX-S TX-N NY-S
3,% 1j?q<:=19L8Sq?LO 5 @ j?q<:=1' 1a:=`LJKS1 .#D1 WD3 & #D1j8OO1-'3 *1 $ bn 60
50
55.1
Loss
52.2 49.1
Capital Rasied
times 1.80
Cover Loss Ratio
1.60 44.2
1.40
40
1.20 29.9
30
1.00
27.9 27.4 22.7
20
0.60 15.7 14.8 14.8 14.3 14.3 13.8 13.9 12.2 12.1 10.4 10.4 10 0.40 9.5 5.8 5.6 0.20 3.2 3
11 10
0.80
23.3
20.7 21.2
5.1
0 Wells Fargo
Credit Suisse
Deutsche
Lehman
RBS
JPMorgan
Washington
IKB Deutsche
Morgan
Bank of America
Wachovia
HSBC
UBS
Merrill
Citigroup
0.00
(#)% *+#,-%.)%$!%& /0112 -#3&4% 5"##$!%&'0;<-=>9%+%8&4? 79
"# $ VD *3,% UVD 15I:xM=YO1:=R1 j8:=@1% ' 3 & 'G12 fdF_ffF
!% 3 /) 6 1 !/)$
g/ryxp> 1^ 831 "<69$6 $#6<8#83 %X 3 /0 >1 !8 # !0 98 # > # Z # ! %# 1 "< "# 1 "< 16/ '76 >;+p1/ '7/6 <qp!1/ '7 '< ?%283 12 #6 16#]]b 6< <66()( ry|, 6<dLKHG CV}HPUI OQ A IMHS ! / := 0 06383 = 0!"0$ 1nCzqpp0!
0"#$ <9 063 \6 1 # %X5 :# 6 b7$#6 !"0 1!
0"#$ <> #Z #/1% 36bnCzr|p '0836
9 c IORMSHOPoGMISDOGKOGVSHOP! <16()( ry|y 9$>
1/9 /3 ! /? 6 1 kMTRHNRe oGV HPVPNHVR DOLKVPH I *+! 3$#%&ry|yryyr:; 6< % / $1 1 >
1= 0 8#% 36br*
80
b8u18=?O1;=R?w1-* & 3VD .1k?O87JSM8=1mLJOS1 N8LK8L:SM8= fdd_ffF Savings and Loan Crisis (1988-1990) 3500
Dow Jones Index
3000
2500
!"
2000
Black M onday 1500
1000 1984
1985
1986
1987
1988
1989
1990
Sources: Bloomberg, TISCO Research 81
"# $ 0 6L?:S1R?KL?OOM8=1>LMOMO1& 'G12 f!F Great Depression Crisis vs Dow Jones Index
Great Depression Crisis Period
Period: 1929-1930s or early 1940s for different countries
A 03-Sep-29 13-Nov-29
..
17/4/30 294.07
A
16/3/37 189.95
B C
13/11/29 198.69
D E
31/3/38 98.95
8/7/32,41.22
82
.
.
.
.
..
..
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
..
..
Magnitude
Duration Months
-48%
2
B
17-Apr-30
48%
5
C
08-Jul-32
-86%
27
D 16-Mar-37
361%
57
E
-48%
13
31-Mar-38
"# $ 0 IS:YQ7:SM8=1>LMOMO1& 'G12 fF Stagflation vs Dow Jones Index
Stagflation Period
Period: 1970s
. .
A 14-May-69 26-May-70
. .
.
.
-35%
13
28-Apr-71
51%
11
C 23-Nov-71
-16%
7
11-Jan-73
32%
14
E 06-Dec-74
-45%
23
F 21-Sep-76
76%
22
G 28-Feb-78
-27%
18
B
.
B
G
D
D
Duration Months
Magnitude
C
. .
F
E
A
.
.
. .
. .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
..
..
83
"# $ 0 :K:=1NLMOMO1M=1fdd_ffF01rQQ?>SO18Q1ISL8=Y1}?=1NJLL?=>s Japan Crisis
Japan's Lost Decade Period
Period: late 1980s and early 1990s
A
494%
121
B
01-Oct-90
-48%
9
..
C
29-Mar-91
31%
6
C
D
18-Aug-92
-46%
17
B
D
A
.
. .
84
..
..
..
..
..
..
. .
.
.
.
.
.
.
.
.
.
Duration Months
07-Jan-80 29-Dec-89
. . .
Magnitude
"# $ 0 {OM:=1NLMOMO1& 'G12 ff Asian Financial Crisis vs MSCI Emerging Market Index
Asian Crisis Period
Period 1997-8
A
. . u
..
-38%
6
21-Apr-98
25%
3
C 10-Sep-98
-46%
5
83%
10
B
A
B
..
.
D
C
Duration Months
09-Jul-97 12-Jan-98
.
Magnitude
05-Jul-99
D
..
...
..
..
..
..
..
.
.
.
.
.
..
.
.
.
.
.
.
85
"# $ 01 WD3 % o 2 W"U,T& -,1H 1f1* * & U 12 5ff_FF1 2,000,000
Bt,m
time (X) 544% 5.0
Capital raising (Bt,m) % of total asset
1,500,000
4.0
% of total Equity
1,000,000
3.0
275% 203%
2.0
500,000
1.0
6% 0
6%
55%
1997
1998
1999
2000
2001
2002
Total 1,925,731
20,162
972,020
718,840
194,115
78
20,515
% of total asset
0%
15%
11%
3%
0%
0%
29%
% of total Equity
6%
275%
203%
55%
0%
6%
544%
Capital raising (Bt,m)
0.0
Source: TISCO Research
%m99?>
1 #Z/$ = 0 '16/?=%80$9$nCCq(.,8083>< %X
'16/? '<" " /? %X #$p(x /#8 #
'16/? 6< /
'16/?>
1=/!"#$2$3$1 1993=6#6 > % / = 0 <9 !%&()( ryyx-*pp*% 3 /)=/% 3%m]CSGVS UHNk83 9 jAD#"0/!0 'b1"7 !=/9 '16/?6 $#$69 %X 86
Q&A
87
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